Streamline your target setting for trade promotion management and optimization

As retailers and manufacturers gain sophistication and knowledge, formulating trade promotion management and optimization strategies becomes increasingly complex. A key aspect to streamline complexity in this process is target setting. Some consumer packaged goods (CPG) companies are pushing toward trade promotion multi-target setting for their sales teams and key account managers (KAMs). But does this method enhance performance, or distract teams from achieving their primary objectives?

Multi-target setting typically involves focusing on metrics such as volume, revenue, trade rates and funding, return on investment (ROI), manufacturer margin, and retailer margin. According to an Accenture report, companies that establish multi-factor targets for their sales teams often experience a decrease in overall performance by up to 15%.¹ This is attributed to the fact that KAMs, in an effort to reach all targets, may fail to concentrate on any individual one, thus adversely impacting desired outcomes.

On the other hand, integrating both top-down and bottom-up tracking mechanisms to create a balanced framework can enable teams to focus their efforts and improve trade promotion ROI by an average of 10-15%,² according to McKinsey.

Top-down tracking sets overall business objectives and allows the organization to drive its strategic goals. At the same time, bottom-up tracking enables teams to create tactical plans that support strategic objectives, while also staying adaptable to on-ground realities. Despite the apparent benefits of such a hybrid approach, many companies find it difficult to balance multiple targets and struggle with implementation. 

In response, the TELUS Consumer Goods team has seen guidelines-based target setting for trade promotions gaining popularity. This focuses on determining the parameters of a successful promotion, without the burden of multi-factor targets. It can simplify the process, enabling KAMs to concentrate on executing successful promotions. A Nielsen study found that businesses using guidelines-based target setting saw a 20% increase in their trade promotion management and optimization effectiveness.³

The guidelines can involve aspects such as promotion timing, type, and depth. By defining the parameters, the sales teams and KAMs have a clear path to follow, which can lead to higher efficiency and likelihood of success. For instance, instead of setting volume and revenue targets separately, they can be combined into a single guideline such as 'maximize the revenue per unit sold during the promotional period'. This approach encourages holistic thinking, fostering a harmonious interplay between different objectives.

Best practices in trade promotion management also suggest that the targets should be adaptable and dynamic. It is essential to review and adjust targets based on ongoing market trends, competitive actions, and consumer preferences.

While multi-target setting may seem an attractive trade promotion strategy for CPG companies, it can often lead to a dilution of focus and poorer overall performance. A more effective approach leads with guidelines-based target setting, supported with top-down and bottom-up tracking. This framework provides clear direction for teams that can help improve trade promotion effectiveness and efficiency. As the saying goes, “If everything is important, then nothing is.” Therefore, simplifying and focusing targets is one of the keys to unlocking superior trade promotion performance.

Learn more about TELUS Consumer Goods’ Trade Promotion Excellence solutions.